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Worldwide Exchange

News/Business. Ross Westgate, Kelly Evans. Ross Westgate and Kelly Evans consider the business stories that have global significance. New.

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China 33, London 28, U.s. 28, Us 23, Boston 21, Margaret Thatcher 20, Europe 20, Brazil 15, St. 8, Thatcher 8, Ross Westgate 7, Asia 5, New York 5, England 5, Intel 4, Kelly Evans 4, Brian Reynolds 4, Cyprus 4, Mexico 4, Britain 4,
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  CNBC    Worldwide Exchange    News/Business. Ross Westgate, Kelly Evans. Ross Westgate and  
   Kelly Evans consider the business stories that have global...  

    April 17, 2013
    4:00 - 6:00am EDT  

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hello. welcome to today's edition of "worldwide exchange." i'm kelly evans. these are your headlines from around the world. a dispute that local debt is spiraling out of control but in an exclusive interview they say it's time for the state to shift away from local financing. stocks in europe are declining turning unexpectedly lower in the session today after falling wall street's bounceback. the tech center could come under pressure as well. intel and yahoo! reported so-so first quarter results.
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>> frankly there are better opportunities to invest capital elsewhere and get a better return so regrettably we decided that we're pulling out of the u.s. welcome to the program. there's no ross wessgate on set. he's at margaret thatcher's funeral. we'll have coverage leading up to that 11:00 here in london. in the meantime, we are keeping an eye on the markets. we want to draw your attention to moves that we're seeing now. german market down 4.3%. we see the ftse down in a range of half to three-quarters of 1% and a session started strongly
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this morning following the rebound we did see in wall street and asian markets as well holding up reasonably firm today. so just going to take a look now across the board at some of the weakness that we're seeing. europe stocks dropping 0.6 of 1%. this follows a session in which we have seen japanese stocks do okay. nikkei up better than 1% today. kospi in the green. only red across asia -- this is a european move. we'll continue to follow it for you this morning keeping an eye on those levels and also coming up on the program today, japan's consumer confidence did jump to a fresh six-year high. we'll get you live reaction from tokyo in a moment. and we'll take a closer look at the nature of the attacks at the boston marathon. also after reporting strong numbers in europe, ford is
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setting its sitghts on china an phil lebeau will give us an inside look with an exclusive interview at 11:40 cet. all eyes on brazil's central bank ahead of the monthly rate decision. economists expect a rate hike as inflation creeps higher and weep previ will watch that. ross westgate will report from st. paul's cathedral. biggest news this morning, china's local government debt is spiraling out of control at least according to one senior chinese auditor talking to ft. he says he stopped signing off on bond sales by local governments and says the situation could spark a crisis bigger than the u.s. housing crash. a top executive disagrees. the head of china's main
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sovereign wealth fund speaking exclusively to cnbc this morning had this to say. >> i don't think it's out of control. there were some people who were a bit worried about that. the government has been taking care of this issue over the last two years or something because the local government debt was financing the infrastructure projects. basically most of those infrastructure projects are sound. the only issue is how can we get all of these projects done so they can generate revenues for the local government so that it can payback the debt. of course i think it's very important for us to wind down this whole process in a well ordered manner so projects that are doing well and implement should be allowed to be completed so that you cannot stop financing our right. this is very much important. more importantly i think it's
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for the government to shift the role. i don't think the local government should continue to do a lot to affect financing. it should be left to the market and left to the companies which will be responsible for their own profits and losses. >> so to worry or not to worry? let's put the question to paul. great to see you. welcome. what's your take on this story coming out of china this morning? is this the next crash? >> i think the next crash is probably a stretch. there's nothing really wrong with china that the government can't rescue. they are going to have to step in. it's been clear for some time that the local governments have been a vehicle by which they got growth going again in 2009. borrow all you can. put money to work. some of it went into good
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infrastructure. some went into marathon tracks. >> they issued debt. we are talking about massive spend. the real question is how do you monetize these projects and how do you make them contribute now to gdp instead of investment at the time. >> some of it is just going to be useless. some of it is valuable infrastructure. it's very hard to get a full scale crisis in china just because they have capital controls. that's not to say it doesn't matter that that big part is the banking sector that would be insolvent in the longer term but it gives the government enough time to get behind the problem and to break out the bad loans and look at some of it into their own balance sheet. we're not looking for a crisis in china. we're not looking for that implosion. you don't have anything like the
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sort of buildup in terms of foreign debt and foreign borrowing. >> it's not necessarily the u.s. in 2008 for example. >> it's not the u.s. in 2008. >> it's interesting as well that this is coming up on a day when the study is getting so much attention. it comes back to the central question of how much debt is sustainable? is there any way in which you can relate china to the u.s. example or what we have seen across europe. when it comes to public debt and local debt that contributes to that, is there a sense of what is the trigger or does it matter if an economy will print or grow or whatever? >> the study which said once government debt hits 90% of gdp growth goes off a cliff has been thoroughly discredited and they must kick themselves that they made a mistake on the spreadsheet. people pay attention to the paper which has just come out that shows that this is a pretty sloppy piece of work.
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the conclusion drawn in terms of the impact of high debt to growth has been basically discredited now. it's fairly clear that governments have a lot more scope to deal with problems. >> was china wrong to pursue this strategy then to help cushion the effect of the global financial crisis and even though people are quite concerned about it including some of the chinese themselves, it sounds like from what you're saying all things considered you don't see a hard landing or crisis as a result. >> as you always say in china, it's too early to tell. i think they have a margin to get things right. if you look at greece, they went into european monetary union and have this lovely window to fix things. a lot of credit with foreign investors and they wasted it. china has a window now where they can fix things whether they will or not -- >> what's the most important thing for them to do in your view? >> deal with the banking sector
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at this stage and not to slam the brakes on and stop growth. everywhere in the world, every problem is made worse by lower growth. >> that is the one lesson we've learned at this point. speaking exclusively to cnbc earlier, we asked the chairman for his opinion on this week's major sell-off in gold. here's what he had to say. >> the confidence in the dollar and euro and some other important currencies. i think if the global economy stabilizes, the gold prices will also stabilize. >> gold, paul. did you like it? hate it? >> i own a little bit. >> this is important. how do you own it? do you own the bars themselves? >> i own a little bit in a fund. you own gold either because you think the world is going to blow up or because you think enough people are going to be convinced that the world is going to blow up. you don't get a dividend or a coupon or any ongoing return
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from gold it's just something you can in the garden or own in a fund and come back after a few years and hopefully whenever things blow up it is still worth something. it's a tail risk hedge. it's either a play on fear or because you're scared yourself. >> if gold selling off, that would suggest that people are becoming more comfortable with the world. why it happening with a sell-off across he ckrocross equities? >> this is the point about it being a tail hedge. growth concerns are coming off but i don't think -- we're not seeing radical downgrading of global forecasts that we have seen in the past. u.s. is having a soggy sort of march period whether it was horrible it's not clear what's going on there. europe is a bit of a mess. europe is always a bit of a mess. asia actually -- the rest of asia is looking okay.
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china is looking better. i think metal is repricing as part of this normalization of world financial markets. >> we'll talk to brian reynolds in the next hour. his view is this has to be with subpriming of commodities and makes levels all the more important when you breach 1,540 or something. >> you will have leveraged money that aren't experts in the asset class involved and that creates volatility. maybe commodities will come off further, maybe they won't, they'll be volatile for some time to go. >> the rapid decline has cost john paulson $1.5 billion this year. paulson made big profits predicting implosion of the u.s. subprime housing market. the biggest holder of the gold etf. has a 5.5% stake as of the end of last year. the cupcake market has
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enjoyed a sugar high as well but now it may be time to get out of the kitchen. customers and investors are losing their appetite. a significant drop in full-year sales of over 20% at crumb. is the cupcake industry seeing the other side of what may have been a bubble. if you want to join the conversation, you know how to get in touch with us. e-mail worldwide@cnbc.com. you can send questions to paul who will be with us for another couple minutes. do you like cupcakes, paul? >> i like cupcakes. i need to stay clear. >> maybe not time to sell out of the market just yet. let's check in on markets across asia. we're joined now from singapore. >> largely positive day for a a asia. the nikkei was back on track after three days of losses
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ending up 1.2% while imf upgraded the country's economic outlook. a weaker yen helped to lift exporter stocks. real estate sector among top gainers. nomura shares lost today. in china the shanghai composite paired down early weakness to end flat while drug makers lent support in the wake of the bird flu situation. chinese banks came under pressure and concerns over local government debt lows as you just discussed earlier in the show. weakness also weighed on the hang seng ending lower by half a percent. elsewhere, south korea's kospi ended just a touch higher two days ahead of the samsung galaxy
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preorders. in australia, defense sectors powered ahead and sensex now trading flat while the country is seen as a big beneficiary to the recent weakness in commodity prices. back to you. >> okay. thanks very much for that. turning our attention to european session as i mentioned just in the last couple minutes here we've turned sharply lower. a sell-off of 0.7 of 1%. decliners outpace advancers by 4 to 1 ratio. the market is scratching around for this particular sell-off. we're down almost three-quarters of 1%. italy down about 0.4 of 1%. presidential selection process will begin tomorrow. here's a look at the bond space to see if we see major moves to
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echo the concern we've seen across the equity space but not quite. look at spanish and italian debt, they are rallying. here's a look at what's happening across the space. sterling is weaker. we'll hear bank of england minutes out in just a couple minutes time. dollar/yen weakened this morning but not as much as you would expect given the sell-off across commodities. on cnbc.com, london's mayor boris johnson arguing that factoryism is alive and well. you can go to our website to find out why some say he could become the next leader of the u.k. conservative's party and mining diamonds is a dirty business but there's now a clean alternative with versions of the precious stone made in a lab. you can find out more about man-made stones and how they are
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affecting the industry. the fund is urging developed economies it take prudent steps to boost demand and read more on that at cnbc.com. a mixed bag for earnings in the technology space on both sides of the atlantic. we'll take a look at the winners and losers. intel and yahoo! all unveiling numbers. we'll be right back. stay with us. welcnew york state, where cutting taxes for families and businesses is our business. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years,
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welcome back to the program. there you are looking at sarah ferguson. one of the many guests attending the funeral today in london for margaret thatcher. more than 2,000 guests are expected at st. paul's cathedral just up the road from our cnbc stud yeaio here. it's the first time i believe that a lot of people will be seeing the inside of this cathedral since princess diana was married there a couple decades ago. it's certainly one of the biggest and most important funerals the u.k. has seen since churchill passed in 1965 and first time the queen will be in well. there's 10 downing street as we show you some of the crowds gathering. it looks quiet still. i can tell you it was drizzling earlier this morning. no surprise for london.
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looks like a clear are day. paul, will you head out there after the program? >> i think i'll get back to work. >> go back to work instead. margaret thatcher would have really liked that. >> it's what she would have wanted absolutely. >> and ross westgate will be joining us in just a couple minutes time. those are images from london. lots of buildup to this day. shares in tesco are trading lower after reporting a loss for the first time in 20 years. the company confirmed it will take a billion pound hit to exit the u.s. market. speaking earlier on cnbc, the . >> we just finished the strategic review of the u.s. we tried hard and looked at how long it would take. there are better opportunities
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to invest capital elsewhere and get a better return so regret regrettably we decided we're pulling out. >> the largest supplier of chip making tools posted first quarter net profit of 96 million euros on sales of more than 900 million euros beating analysts estimates and seen shares respond up 8%. the company widely seen as a bellwether for the tech sector announced a buyback plan. asml announced its ceo will succeed the current ceo. and intel's first quarter profit fell by a quarter missing forecasts as revenues slipped more than 2%. struggles of the pc market as consumer shift to tablets and smartphones. they expect revenues to fall 8%. the company expects its new chip and ultrabook sales and perhaps improving economy will lead to
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better growth in the second half of the year. >> demand environment played out as we expected and i think the company executed well. as i just heard john say, we saw nice growth in our data center business. it was up 7% year on year. and within the overall market for computing, we're seeing nice growth and there's obviously a transition going on there. i think we're well positioned for that as well. >> intel shares closed up less than 1% and moving around after hours. also up a little less than 1% in frankfurt this morning which is no small feat considering germany's market is down by better than 1% as we speak. yahoo! first quarter rose and beat forecasts but revenue was flat and shy of estimates as the company feels the impact of declining web traffic and display ad sales fell for the second straight quarter down 11%. yahoo! is also projecting second quarter revenues that fell short of analysts expectations. ceo marissa mayer says her plans to reverse the trend is still on track and will show results in the second half of the year.
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she cautions it will be years before yahoo! grows at the rate of rivals of google and facebook. shares down 4% after hours better than 6% this morning getting hit hard in europe early in the trading session. coming up in the next hour, we'll break down those yahoo! results and its outlook with a senior equity analyst. also, assets under management rose 2% in the first quarter at gam holding. it reiterated positive outlook for 2013 setting strong demand for fixed income especially in emerging market bond funds. shares lower by almost 2%. speaking of emerging markets, all eyes on brazil's central bank ahead of the monthly interest rate decision. the bank has come under pressure to hike rates after inflation jumped 6.7% in march reaching the central bank's inflation ceiling. economists expect a rate hike that could see rates at 7.75% by the end of may implying 50 basis
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point hike. and paul is still with us. lots happening this morning. do you still like emerging market debt. this has been a major investment class for you. >> in as much as you like any debt here and you have to be aware that bond yields in any asset class are at multiyear lows and there's that caveat that at some point the great debt unwinding is going to come and you want to be wary of having it on your books. >> isn't a surprise this year and continually since the financial crisis is developed world debt in relation to emerging and that's continuing this year in spite of everything. >> in terms of where we've been making money recently has been on the local currencies rather than the debt itself. i think that's what you would expect. the big drivers last year were the recovery and especially the spanish and italian bond markets. they performed well because they were bouncing back. i think the big driver of bond
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markets has been growth is debt in a ditch. central banks aren't hiking ever. and that's going to prolong the life of this great bond market that we've seen. >> it sounds as if it's a reach for yield complicated by emerging markets by the currency effects that you talk about. we've seen strong performance in some of these areas. where do you pick now? are you getting more selective? what investments do you like for the rest of the year? >> i think the thing that's going to affect us at the moment is what's happening in commodity markets, which will lead us less in south africa and brazil and russia and much more in places like turkey and big commodity importers who will see a positive balance in terms of trade effect after the commodity price. it's good for this time zone. it's less good for south america especially. mexico is more plugged into the
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u.s. economy and i think in asia again good for korea. weaker for indonesia. i think commodities is one of the themes that we're looking at. >> and clients are liking this asset class. people looking at emerging market debt. is that because there aren't good alternatives here? >> once you look at the yields, the yields on u.s. treasuries, low yields and rest of the world, the opportunity of moving out of major bond markets is so low that people are reaching for yield and they remain strong. what's the biggest risk? >> that things get better. >> that would be a good problem to have. paul will stay with us for a couple more minutes. straight ahead on the program, we'll get u.k. jobless data and we'll assess implications for britain's recovery when we come back. we went out and asked people a simple question:
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how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
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welcome back to "worldwide exchange." he the head of china's main sovereign wealth fund denying a report that it is spiraling out
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of control. stocks in europe falling turning lower early in the session after initially following wall street's bounceback and the tech sector could come under pressure as intel and yahoo! both report so-so first quarter results and shares of tesco falling as it confirms it's exiting the u.s. market. >> there are better opportunities to invest capital elsewhere and get a better return so regrettably we decided that we're pulling out of the u.s. >> and we are now getting news out of the bank of england minutes from the latest meeting and employment data. details on that april meeting show they voted 9-nil for rate action and 6-3 to keep asset purchases steady. the theme of king being outvoted by his court continues and
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sterling weaker by a quarter of 1%. a quick update on the employment figures that we're seeing for the british economy. it looks as though these are march figures adjusted showing jobless claims fell. remain at 4.6% of the workforce and it looks as though the unemployment level, however, rose by 70,000 to 7.9%. in fact, the unemployment increase was the largest since november of 2011. it looks as though employment through february posted its first decline since october 2011 and average earnings growth of 1%, the lowest since records began. a little bit confusing. i hope i didn't confuse people there too much in talking about february and march and three-month figures. let's introduce phil with just your initial take on what looks
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like -- king outvoted again wanting more policy action and perhaps justified by these employment figures. >> certainly it's the third month in a row where we've had a 6-3 vote with someone outvoted by the rest of the committee. there's no surprise. the real question mark is where do we go from here and what potential change does the new government set to introduce when he takes the chair in july? on the data there are some interesting aspects of the labor market figures. the labor market really has been the standout performer in terms of the economy over the past year and these figures certainly quarterly figures are volatile every three months but did get some indications that perhaps the labor market is turning a bit with not just a small rise in unemployment but a falling employment as well which is the first fall that we've had for over a year. >> how much do you make out of
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this? >> i think we've got this ongoing issue where the labor market has outperformed. the ominous thing is the deterioration with weak growth which one of the things we look at is where banks are protecting themselves and not committing capital to good news but just protecting the companies that protects employment but doesn't give you growth or momentum in the broader economy. >> has the bank of england been a major policy error in your view? >> i don't see what else they could have done really. the expert on the u.k. here. they've done everything they could think of. it hasn't obviously helped. low yields make pension deficits worse and make corporates less likely to invest.
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they backed themselves into a corner here. >> what's your take? >> i do think that qe has helped the economy over the past four years. our own view is you get diminishing returns to each slug of qe as you go along. we suspect in due course that we'll get another expansion of asset purchases which at the margin may help and there may be psychological boost to markets but the other things to watch out for are the success or otherwise of bank of england's funding for lending scheme which we're relatively hopeful will help to expand the supply of mortgage credit. >> it doesn't seem like it's done much frankly. >> it's a slow burn. the last couple of months of data have been disappointing but through the back end of the second half of last year what we saw was a steady increase in mortgage approvals and that's helpful. the other thing to watch out for is what's happening to the small business sector. we have been calling for some sort of government if not bank
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of england action to help channel those credit flows to small businesses and there seems to be something bubbling under the surface but not has come to light. >> fiscal policy the better tools to use. >> distinctions are blurred sometimes. it's a job for the government rather than the bank. >> we'll leave it there. we'll see what kind of room this gives mark carney to be more aggressive if he wants to. take a look as i mentioned to what's happening in the currency. we're seeing sterling down by 0.3 of 1%. not a huge surprise because for the last couple weeks now people have been saying to keep an eye on sterling here. it weakened significantly but hadn't priced in weakness coming out of the commodity space. britain's employers are a lot of chair performance relies on mining companies to do well. european markets have been weaker this morning. that theme continues although they are off lows.
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the ftse down about 0.2. roughly steady giving up 0.4 of 1% today. we're showing you arrivals for the funeral of margaret thatcher happening in london. bond space shows you that we're not necessarily seeing the same kind of concern. italy is selling off a little bit. yield moving a touch higher. not the case in spain last time we checked. the ten-year german bund up 1.3%. now we would like to welcome back our viewers in asia who have been experiencing an interruption in programming due to technical difficulties. we're sorry about any inconvenience that may have caused. as i mentioned, the major event happening in london here today is the funeral for the former british prime minister margaret thatcher. that will start in about 90 minutes time. plenty of people arriving to st.
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paul's cathedral including the queen and 11 prime ministers from around the world are expected to attend. ross westgate joins us outside of st. paul's cathedral. you are so close we could shout and hear you. >> you're on the other side from me and that will take me a long time. central london has gone into lockdown mode. the st. paul cathedral is at the western end of the city from london. to get from st. paul's to palace of westminster is now impossible if you drive in a car. all of the roads are closed. the only traffic you see behind me is that which is directly connected to the funeral. security is also been even stepped up from that what was planned post the boston bomb
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there. 4,000 police and security personnel lining the route. shops have been asked to take away loose objects or things used as tools. local banks are closing from around 10:00 to 11:00 in of a hour's time. the likes of hsbc as well. there will also be vigilance on the crowd. around st. paul's already it's pretty insurpassable on some of the narrow stretches for people coming to see the people arrive and of course eventually thatcher will arrive on a gun carriage. security undoubtedly stepped up as well. one of the other things that of course we're also looking at is the timing of what's going to go on here. thatcher will leave the palace of westminster at 10:00 in a hearse and transferred to a gun carriage where the west end stops and city officially starts
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and city upped the rule of the corporation of london. the prime minister david cameron will arrive at 10:30. the queen around 10:45. the gun carriage at 10:55. this is all london time. that service will begin at 11:00 lasting around an hour. there is a thought that there may be those who will protest what thatcher's government stood for and may turn their backs as the funeral procession goes past. police and security forces have been asked to try to stop that happening. quite how they do that i'm not sure. there are extra measures taking place. >> ross, thanks very much. it's actually kind of a nice day. it's a clear day here in london for that raining a little bit but we'll continue to get more from ross in the next hour. ross, stick around. phillip is here on set. i just wonder if you can comment on the timing of margaret thatcher's death coming when so many people are split over her
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legacy to this day. >> margaret thatcher was a divisive character. it's fair to say that. there was a recent opinion poll which confirmed that she was the most divisive prime minister that we've had in modern times. i think if we stick to the economics of it, one question from a big picture point of view is does one think that the u.k. is a better place to do business in compared with the pre-thatcher period and the answer has to be yes and we can debate all of the other facets and individual measures separately but the big picture is margaret thatcher was a big plus for the u.k. economy. >> ross, do you want to jump in here? >> i think it's actually -- i wonder whether phillip agrees. it's probably less macro policies rather than microp
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micropolicies. the privatization program before the thatcher government is worth remembering that the telecom industry was owned by the government and deregulation of the city of london and i wonder if it's micropolicies that stand out more than the macro position. >> i agree, ross. the micropolicies does make a big change to what happens from a top down perspective. absolutely. i think from memory one of the first things that thatcher government did was scrap foreign exchange controls when it came to power in the late 1970s. so absolutely. privatization, eventual greater competition within the previously owned government sectors was a big plus. and obviously one contentious p policy was power between
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employers and trade unions. arguably now the u.k. has a much better industrial relations record than it did before 1979. >> you have to remember though in the '70s, you and i were doing our homework by candlelight when we had a three-day week. it did need rebalancing from that point of view. takes those lessons from those micropolicies which were successful whether there's some lessons today that need to be drawn by this current government because they are trying to kick-start wider only ownership but thatcher gave people the right to own their own homes but they had to qualify for mortgage on affordable income. >> that's one thing which the thatcher government did particularly in the early to mid 1980s. the big liberalization financial markets. scrapping of competition and
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credit control happened a lot earlier. we had banks and buildings more able to lend the household sector. of course we had the big sales of public sectoral council housing to public sector tenants as well. we're starting from a very, very different position now in the sense that if anything the government is trying to reverse what is now a decline in owner occupancy levels in the u.k. it must be said of course the thatcher government made mistakes from a macro perspective don't forget that we had big 1990s recession which we would say was a result of both monetary and fiscal policy being left too loose. we can learn from successes but we also learn from mistakes and that's one of the great things about economic history generally. >> we'll leave it there. >> the boom.
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>> that's right. ross westgate, we'll see you back in a couple minutes as we continue to keep an eye on people arriving for that funeral which gets under way in just over an hour's time. thank you both. cypress' president has blamed the central bank government for it the current banking crisis. he wrote that the governor failed to regulate the banking system effectively. lawmakers are said to be considering if an investigation should be launched into whether the government was misled in the buildup to the crisis. no one better to ask about this than investment director at gam and cyprus, who is to blame here? >> i think everybody was in on it. it is like we have seen all along across the periphery. we had a comfortable situation
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and then suddenly the music stopped or the tide goes out and you get this structural change. it's unhelpful thing to worry about who to blame. we can do that in a few years. the key thing about cyprus is how much worse they made things in just five days. cyprus parliament decided to bluff the euro group without any as far as i can see backup in terms of what else they wanted to do and it was those five days which did more damage than anything else we're pretty sure that even by euro group's calculations and dishonest about almost everything, even in their calculations the cost of the bailout is up by 30%. >> this hasn't got enough attention in the last couple days. what do you think will be the response? >> i don't know -- the euro group regard this as a success. mission accomplishedind them. i think the important thing is
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we are getting -- it's bigger than cyprus. they will not buy bank equity. this new move to embed banking union in some sort of treaty change seems to me to look like they aren't going to pay it. >> there's not an alternative. they have to. i don't understand. ultimately is it just a political maneuver ahead of elections this fall or do you think they'll somehow keep the euro together without having to do that. >> sometimes you have to believe what politicians say. what we're hearing from is the buck stops here. 'l b min somebody has to pay. it's not going to be the germans. it's going to be stake holders, equity holders, bond holders, maybe depositors in peripheral banks. >> that has to chase them out of
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the european monetary union. >> i question that. it's very hard to see a scenario where anything remotely as grotesque as cyprus happens again. i certainly would be much slower to draw the conclusion that it means the end in the present form. >> paul, thank you very much. turning now to japan with more evidence consumers are buying into economics. we go live to tokyo. >> the consumer confidence index for general households improved for the third straight month in march to 44.8. although a reading below 50 suggests consumer pessimism, this mark is at the highest level in nearly six years. the cabinet office updated the view on the index showing signs of improvement. consumers are anticipating that higher stock prices and cheaper yen will improve company
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earnings and lead to more hiring. consumers are also starting to feel the time is right to conschasing durable goods such as cars and houses. on the other hand, prospects for higher income and living standards were unchanged. back to you, kelly. >> thank you so much, sir. here's a look at what's on the agenda in asia tomorrow. we'll see if japanese exports pick up when march trade figures come up at 1:50 cet. after eight straight monthly trade deficits of course and hong kong first quarter earnings including results from china state construction and china overseas land. and tsmc will post quarter one earnings and that will be important given intel's disappointing release. is the asia driven strategy sustainable for burberry?
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welcome back to the program. what you're seeing here is the procession across central london for the funeral of margaret thatcher. it will end at st. paul's cathedral where the mass begins at 11:00 local time. the parade route involves crossing pretty much through the
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central part of the city and you can look there at the crowd that has gathered for it. there's been a lot of speculation as to whether there will be further protests and kinds of protests that we've seen in london for about the last week or so since her passing. some were going to turn their backs symbolically because she remains a deviivisive figure he. this is a funeral ceremony that london hasn't seen in quite some time going back to probably 1965 with passing of winston churchill and people taking every possible advantage of windows and doors and otherwise to see this unique experience and so as that gets under way, we'll hear from ross westgate who is going to follow the proceedings for us in a couple more minutes time. in the meantime, burberry shares are trading higher after a 9% increase in revenue for the second half. shares are up on the back of that. they saw revenue jump at the end
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of march topping analysts estimates and highlighted a rebound in chinese sales. burberry saw strong demand for men's wear during the same period and it expects slow growth in 2014. are you surprised by the positive response in shares here? almost 4%? >> i am positively surprised by the level of sales because they are twice the level of consensus. one of the first luxury comments to warn of a slowing almost a year ago now and as a result they were one of the first to report a rebound as well. you contrast that with last night that suggested negative comparable sales. >> is it a contrarian indicator? they talk about asian weakness when the chinese growth story was holding up well and they come out when everyone looks at slowing gdp figures and say things are fine. what's going on?
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>> with luxury it's a choppy market. it has slowed for a couple reasons. you have macro issues and you also have at the same time chinese consumers becoming more discerning and they prefer more exclusive stuff and they ran into problems because it lost its way in terms of product. product wasn't standing out enough. they made that investment and they are rebounding. the market is overall choppy but you see a big gap between winners and losers. >> is that why prada has done well because it's underestimastf you know you know kind of thing? >> prada is a special case in another way. i say it's like the czar of luxury. periodically they keep flowing stuff that you find the product today won't be there tomorrow so you are comfortable buying it and going back for more and more stuff. some of the more standard local stuff is almost becoming too
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common. those brands are suffering a bit more. secondly the whole discrete thing. they are flying in this economy. >> is that the trade you would recommend is that people kind of seek out those specific brands within luxury and figure out who winners and losers will be for the new chinese consumer. >> very much so. you also see this. the other thing luxury companies need to talk about more is broader emerging markets. we focus too much on the chinese. >> we are guilty of that. we are guilty of that. it's such a massive story. also a massive story were shares trading sharply lower. retail giants posted earnings in 20 years with net profit falling from 2.8 billion a year earlier and the company will take a billion pound hit to exit the
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u.s. market. what happens with tesco from here? >> the big issue from this company is it's more mature than others thought. the issue in the u.k. was largely people discovered other format shopping discount when they want cheaper and the problem which is additional on top of that is the same problem is now showing upov overseas. it says even those businesses are not as good as shape as most people thought. >> they said they won't spend as much because they won't be expanding as aggressively. if that's what you built your sales on in the past, what drives sales now for them? >> a lot of people will call this a silver lining. the business is less capital investment. the flip side is that is what drove growth and you don't have as much growth in the future. >> you don't like tesco here. this is not a time to get in and look at a bargain and ride a
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value rebound. >> i think the u.k. is the biggest place for this business and that's slowly getting better and that will reshape the fortunes of this group but i do think you still have problems. i think it's still a bit early to bet. >> okay. we'll leave it there. thank you for stopping by. still to come on the program, homemade pressure bombs look likely to have been used in the boston attack. what does that tell us about those responsible? a significant amount according to our security expert who will hear from at 11:30 cet and u.s. stock markets recovered most of the losses following that scare. our next guest says investors should wake up to voodoo factors.
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welcome back to "worldwide exchange." i'm kelly evans. these are your headlines. stocks in europe are lower after following wall street's bounceback. the tech sector could come under pressure as intel and yahoo! report so-so first quarter results. the head of china's main sovereign wealth fund disputes a report that local government debt is spiraling out of control but says it's time for the state to shift away from local financing. and more details are emerging about the make of the explosive devices used in monday's deadly bomb blast at the boston
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marathon. u.s. markets did rebound yesterday but today it looks as though we'll see more selling pressure t pressure. the dow is looking to give up 50 points at the open. it's been europe where we have seen selling pressure in the last hour or two of trade. asia overnight was a reasonably strong session. we're flat now but as you can tell here asia was lifted. european session lower. here's a look at major european market. interestingly italy's index is one of the better performers down a tenth of 1% as the country prepares on thursday morning to begin the selection process for a president. ibex down two-thirds of 1%.
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unemployment is rising in britain and average hourly earnings recorded one of the smallest increases on record in the first part of the year. turning to bonds, here's a look at what's happening across the sector. not necessarily the risk off attitu attitude. we see flows into italy and spain. 4.2. 4.6 there. german bund is selling off. euro/dollar is weaker. the euro is rebounding helping to explain the turnaround we've seen generally since stocks came off lows. it's just higher. still below 1.32. over here sterling/dollar is weaker. it has fallen back below 1.53. this is one to watch if there's further evidence of weakness in the british economy and a sense that with mark carney coming in there will be more quantitative easing measures from the central
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bank. dollar/yen adding 0.7 of 1% over the 98 level. it boosted japanese stocks overnight. >> most asian markets ended in the green thanks to the positive lead from wall street overnight. nikkei recouped recent losses ending higher by 1.2%. the imf also upgraded japan's economic outlook thanks to the aggressive easing steps. the yen renewed trek downwards lifting exporting stocks. miners, property developers and financials were broadly higher but shares dropped over 2% at nomura that italian authorities seized billions in assets in a probe involving a troubled italian lender. the only one spoiling the party are the greater china markets. shanghai down a touch.
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hang seng increased the losing streak. and financial times reporting the situation could spark a crisis bigger than the u.s. housing crash and shares of prada slid over 2% today. sentiment was hurt by al qaewea than expected sales. south korea's kospi ended a tad above the line. they gained 1% today as commodity prices clawed back some lost ground and india sensex is gaining for the third straight session as weaker commodity prices will benefit the country given their huge imports. back to you. >> thanks very much for that. turning to boston where the latest news from the fbi says there are photos released now of bomb fragments from the scene of monday's attack at the boston marathon. the devices may have been packed in a pressure cooker with bbs,
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ball bearings and nails left in nylon duffel bags and set off by timers. no one has yet claimed responsibility. the toll remains at three dead and 176 injured. the third victim was been identified as a chinese national. president obama will travel to boston for a memorial service on thursday. the u.s. senate has shut its mail facility for the next couple days after authorities intercepted a letter sent to mississippi republican roger wicker. it was laced with the poison ricin. the letter was post marked from tennessee but had no return address. here in london we are watching the funeral procession for the former british prime minister margaret thatcher. that funeral is due to begin in just about an hour's time at st. paul's cathedral. just outside our studios in
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london. ross westgate is not with me because he's outside of the cathedral. it looks as though they nearly have arrived. they still have an hour left to go. >> the hearse which you saw creeping behind the church there is just about a half mile away from st. paul's cathedral. it also pretty much marks the spot where the west end becomes the city of london or the city of london that's under the control of the corporation of the city of london. what will happen there is that the hearse will stop and lady thatcher's body and the coffin will be transferred to a gun carriage. from that point on they will come down this road you are looking at towards st. paul's and she will be due to arrive here -- body due to arrive at 11:55. the queen will arrive 15 minutes
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before that. the security as you can see is very tight. there are crowds lining the entire route so far. the procession has been rather somber one. we haven't seen any signs of protest and rather simple at this stage as well with just the motor bike riders and indeed the hearse and security vehicles behind as well. 2,300 people in the st. paul's cathedral. ex-prime ministers, members of her cabinet, those who fought in the war, members of the opposition parties as well during her time as premier. she was prime minister from 1979 to 1990. never defeated in a general election. this is now the car pulling up where the transfer to the gun carriage will take place. that will take a few minutes.
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security stepped up over 4,000 police on this route between palace of westminister where she was lying this morning so mps could pay their respects up to st. paul's cathedral. extra precautions taking place. shops have been asked to take away items and banks are closed in case there are signs of protest. a polarizing force in british politics. kelly? >> the entire service is meant to be a pretty humble affair. guardian here writing it's been six years in the planning and thatcher herself playing a significant role in that. she wanted it to be something simple and emphasizing the difference it between a funeral like any other funeral and not a memorial service. since you are outside there at st. paul's, how crowded is it?
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>> around the steps of st. paul's you can't walk down the sidewalks. there are people here 6:30 this morning. i spoke to a couple of them asking why have you come here they say to pay respects for someone we thought was a great politician whether you agreed or not with some of her policies they recognized her contribution to british politics and she did have an impact on the 20th century and i think it was just simply to pay their respects and there's a large crowd. it was notable when boris johnson turned up, the current mayor of london. he got a cheer and some suggest that boris is in a way an heir to margaret thatcher and that he is someone who speaks his mind in the way that she did as well and maybe some of the original thatcher supporters -- not all but some echoes perhaps in boris
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johnson. that was an interesting aside as well as we now see the coffin being taken into before being transferred to the gun carriage. >> thank you so much. ross outside of our studios at st. paul's. speaking of the continuing influence that thatcher has had, argentina's ambassador to london declined her invitation to attend the funeral. seen as a mark of continuing sensitivity over that island dispute. turning our attention to one of the biggest stories in the market for the last couple of days of course that has been the large sell-off in gold. let's get an update as to where gold prices are trading today. rebounding by three-quarters of 1%. down double digits. what is driving the sell-off? brian reynolds might have an idea. certainly early from boston. we hope that no one you know was directly involved in what happened at the boston marathon.
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if you want to perhaps mention a little bit about what you think is going on here with regard to gold. >> there's been a number of catalysts that have pushed gold down in recent weeks. there's been some central bank selling. there's been selling in india. i think structured financing has also played a role. if you go back a few years, it's very clear that there was support around the 1,530 area for gold. over the last two or three years we've been subpriming commodities. wrapping commodities like gold into structures that we did with mortgages in the last boom. and these structured finance packages have caps and floors and i think there was a big floor at 1,530 and it was clear if we broke that support level and went through that floor, these structured finance products leave people long or short commodities at the worst possible time and that meant dealers were long gold all of a
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sudden so they dumped it into a declining market. >> it's a great point. one you have been drawing attention to for some time now. what happens now that we breached these levels and is subpriming of these and are these structured finance products going to continue? >> i think they're going to continue. i think first we need to see some stability in the commodities. we don't know if this price decline is over yet. at some point probably in the next few weeks it will have exhausted itself and will begin to get new stability and once prices have been stable for a month or two, i think there's enough underlying demand for commodities. there's enough fear inflation and enough fear of central banks defacing currencies that they will structure these commodities especially gold all over again. if we do that and gold settles around current levels, the new caps and floors will be around 1,200 and 1,500 for gold and those will become very, very important levels again on the upside and the downside. >> you mentioned that this is not just a gold story either.
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it was really interesting about the sell-off that we saw in gold that took down the entire commodity complex. is this move extending the kinds of activity we see at least in terms of the investments you describe to other commodities as well? >> in the short-term, these commodities and also stocks are linked together because in the last two or three years, not only have we been structuring gold and other commodities, but we've also been using gold as collateral for other investments. major exchanges, clearing houses and wall street banks have been accepting gold as collateral for other investments from things ranging from other commodities to credit derivatives to stocks. and so you saw the stock market decline a little bit because of this gold drop along with commodities and we're not sure that that's over yet either. in the longer run, we're being drif driven by a credit boom. in the short-term because of this linkage, all of these other markets can be affected by the
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gold price. >> i know that's why you think this is a buying opportunity. we'll get into that. brian reynolds will rejoin us in a couple minute's time. like gold, the cupcake market enjoying a sugar high and now may be a time to get out of the kitchen. new york based chain crumbs has reporteded a drop in full years sales over 20% hammering shares. is the cupcake industry now burning to a crisp? how do you feel about it both as an eater and investor. you can e-mail us at worldwide@cnbc.com and send through some questions if you have them for brian. we'll put them to him when we come back in a couple minute's time. here's a look at what's on athe agenda in the u.s. the beige reports economic conditions and as for earnings we'll get numbers from abbott labs, bank of america, pnc financial and st. jude medical before the open.
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after the close it's american express and ebay. the coffin of former u.k. prime minister margaret thatcher is making its final journey. the funeral is due to start at st. paul cathedral's within the hour. >> the lord is thy keeper. the lord is thy shade. our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives.
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you are watching world wo"w exchang exchange". i'm kelly evans. the tech sector disappoints with okay earnings for yahoo! and intel. over on cnbc.com today, london's mayor arguing that thatcherism is alive and well. and mining diamonds is a dirty business but a firm in singapore offers a clean alternative. the imf says there's no silver bullet. the fund urging developed economies to take prudent steps to boost demand. you can go online for more. still to come on the show,
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economists are expecting an imminent rate hike in brazil. will the central bank make the much anticipated move today? we'll discuss that when we come back. we'll leave you with pictures of the coffin of former u.k. prime minister margaret thatcher. her funeral due to begin in just about 40 minutes time. usiness. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years, and we're creating tax free zones for business startups. the new new york is working creating tens of thousands of new businesses, and we're just getting started. to grow or start your business visit thenewny.com
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welcome back to the program. we'll take a look at u.s. futures which are pointed lower this morning despite a rebound yesterday it looks like markets are under pressure. dow shedding 60 points at the open following a broadly weaker session in europe. all eyes on brazil's central bank ahead of the bank meeting. inflation jumped in march breaching the imposed ceiling of 6.5%. they expect a rate hike that could see it at 7.75% by the end of may. that's half a percent above current record low of 7.25. great to see you. it sounds like brazil better increase rates here.
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that's certainly what the market expects. emerging markets can't be as accommodative to underperforming growth as they would like. >> i think you're quite right as you said. markets are now looking for a hike this evening. rates markets are hoping to price more and looking for 50 now. and the comments last week on thursday and friday which were more hawkish were a key part of it. those are the factors that led citi to revise up its forecast for a hike today which we weren't expecting previously. i'm not sure that the argument that brazil bigger hike is correct. when we look at emerging markets, brazil is weak. recent data has been soft whether you look at retail sales and industrial production and brazil is one of the much more commodity intensive guys around
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and we've seen what's happened in the key metals in the last couple days and that does affect brazil that looks quite weak. i would say in a fundamental perspective the fact that brazil prices in something like 170 basis points of hikes at the end of the year makes it overseas. the problem of course is that the yo-yoing in policy rhetoric can be painful. >> this does highlight the conundrum to some extent. one of the reasons why the global economy hasn't done as well in the first part of the year. if emerging markets are underperforming but inflation remains sticky, central banks can't necessarily be as accommodative as perhaps a developed market might be in a similar situation. >> i think that's true although let's not forget that commodity prices are falling and for emerging markets in total it's food prices that matter.
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i would almost make the point that emerging markets to me at the moment look very different. let's look at mexico in comparison to brazil. mexico looks better because china and commodities matter for brazil and u.s. matters for mexico and citi is bullish on u.s. growth prospects. >> that's a great point. we've gone long past the point of being able to lump all of these countries and emerging markets together. just on this brazil point, even with rates at a record low, 7.25% as you say, perhaps should central bank be trying to get ahead of a rollover in inflation if that's what you suggest is coming down the pike and say that we expect these inflation rates to roll off and growth is more important to us. >> exactly. you know, your statement itself record low of 7.25. that's a high nominal interest rate to have in a country where you need to boost investment and
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boost growth. our view has been for some time that they would be better off allowing the currency to strengthen as you remember they've had this slightly convoluted policy of intervening on the upside and the downside. it would have been more sensible to let the currency move and keep interest rates relatively in brazil's context. that hasn't happened. >> thank you for your time. still to come on the show, stick around. we'll speak to a guest that agrees with a report out of china suggesting the debt situation is out of control. you'll find out why when we come back. here's a look at how futures are trading ahead of the open on wall street. 60 points off the dow. we'll be right back.
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welcome back to "worldwide exchange." we're watching the funeral procession of former british prime minister margaret thatcher. it's being transferred to a gun carriage where it will proceed toward st. paul's cathedral for a funeral set to begin in half hour's time. it's the biggest funeral since the death of winston churchill back in 1965. the cost, an estimated 10 million pounds to taxpayers is one of the reasons there have been protests. we heard scattered reports about that this morning but generally it's been quiet and relatively somber affair on the streets of
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london. ross westgate is down there by st. paul's cathedral as well. there are over 2,000 dignitaries in attendance and about double perhaps even more in terms of the police force especially in light of what happened at the boston marathon. if you are just joining us on the program, these are your headlines. tech sector could come under pressure. yahoo! and intel reported so-so first quarter results. stocks in europe are declining turning lower after initially following the bounceback yesterday. more details emerging about the makeup of the explosive devices used in monday's deadly bomb blast at the boston marathon. it looks to be a weak start for u.s. markets because futures
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are reported lower. s&p and nasdaq looking to decline. asia held up reasonably well but european markets have been selling off this morning. pressure in particular in germany. elsewhere we have seen declines in the range of 1.2%. off the lows. ftse is down after britain's disappointed earnings figure and an increase in unemployment. the ibex 35 was holding up better but now joining the sell-off. turning to the latest out of boston, the fbi has released photos of bomb fragments from the attack at the boston marathon. the investigation is wide open. no one has yet claimed responsibility and senior correspondent scott cohn is on the ground in boston joining us now. still no details. no leads. have we heard anything further this morning?
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>> reporter: well, they are still of course going over that very complex crime scene behind me, kelly. we attended the media briefing last evening. they are still appealing to the public for any sorts of video evidence, clues, but as you said there are now some pictures of at least one ofhe devices that caused all of the devastation at the end of the boston marathon. take a look at the first picture which is the twisted remains of a pressure cooker that was used for at least one of the bombs. the other one may have been a pressure cooker bomb as well filled with all kinds of shrapnel. bbs and small nails designed to maim the people caught in its path and there are also shreds of what may be a black duffel bag and one of the things that authorities have asked the public about is if anybody saw somebody carrying an unusually large dark or black bag that was laid at the site of the explosions. two explosions of course as we
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now know a block apart at 2:50 on monday afternoon. we also now know that the third victim, the third death as a result of this was a chinese graduate student at boston university. a chinese national awaiting the release of her name pending notification of relatives. president obama will be here in boston tomorrow to attend an interfaith service and the city is slowly trying to get back to normal but still a 12-block long crime scene which as we said is the most complex that these authorities have ever encountered. kelly? >> we'll leave it there. scott cohn out of boston. thank you very much for that this morning. let's go to head of north america forecasting at ihs. she's actually been looking at some of the details coming out of boston and trying to interpret them for us. good morning. so what do these reports about a pressure cooker and devices themselves suggest to you about what's behind these attacks? >> as we've been saying since
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yesterday, the indication is that this is probably a lone actor or a small group, homegrown terrorist. we're going to need more information about the device before we can really be sure of course. the pressure cooker is not a particularly sophisticated device. if they find a timer was attached, it would make it slightly more so but something either of these groups could use. >> it does seem to be one of the more unusual things about this attack. >> there are a couple reasons you might see anonymity. they may be letting panic set in. if you are talking about right wing extremist group, they may be choosing to an unanimous because they think it furthers their cause. >> what does this particular attack most remind you of in terms of prior incidents that we've seen? >> it's odd in comparison to prior incidents. you can look at prior attacks including the atlanta 1996 olympics or even because of the kind of weapon that was used, failed attack on times square
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last year. this attack is unusual. >> what else about it have we learned at this point? not much information coming out from authorities and it does seem unusual the extent to which they say please get in touch with us if you noticed anything, seen anything. does the social media impact here affect or help at all in your view? >> it's a needle in haystack. there's always a possibility that one small thing could lead them to the perpetrator but they are trying to get as much information as they can because that's their best shot at finding who did this. >> when it comes to the response kb again for other major events, london marathon here on sunday and the biggest event in europe. we have margaret thatcher's funeral today and we have boston which isn't far from where your office is shutting down a big part of the city trying to still look for evidence or just still concerned there may be out there. >> it's true. of course security presence has been increased for both events you mentioned in the u.k. but
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major u.s. cities are on heightened alert. doesn't look to be further attacks in the u.k. and events you are talking about but you see increased police presence and random searches during the events and bag checks just to be sure. >> just last point here. what are you looking for at this point in terms of further detail? >> we're going to want to see forensic evidence on the weapon as it comes out and of course anything else about the way the weapon got to where it was and the most important thing being if someone claims responsibility but lacking that the details on the weapon is our most likely way of figuring out who did this. >> we'll leave it there. thank you for your time. head of north america forecasting at ihs. turning to corporate news today, intel's first quarter profit fell by a quarter missing forecasts as revenue slipped more than 2% reflecting struggles with the pc market. intel expects second quarter revenue to fall as much as 8% and also trimming full year
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capital spending plans. >> last night intel reported results that were in line with analysts expectations. wall street was looking for $12.6 billion in revenue. 41 cents. turned in 12.6 in revenue and 40 cents in eps. guidance, just about in line on revenue at $12.9 billion. the gross margin guidance at around 58%. let's take a look at what happened in the quarter because there were a few surprises. we knew overall pc market was weak reflected in intel's pc client business down 6.6%. 6% year over year. data center business prettystro. gross margin came in at 56%. intel got it to around 60% plus
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or minus a few percentage points. this was weaker than you would expect here. intel did cut its cap ex spending by a billion dollars. that projection for the year. they planned to spend $13 billion cap ex. they cut that down to $12 billion. so what intel is really seeing here is a shift to tablets and convertible touch pcs away from traditional pcs. intel characterizes those in the pc category. they wanted to keep tablets separate from pcs and now it's one market opportunity to hit their targets for the rest of the year. they'll have to pick up share in android. do a bit better in that convertible market by bringing down the cost of touch pcs. something they have been working to do. we'll see if they can do it. a new ceo coming in in just a couple months. that person has not yet been named. guys, back to you. >> yahoo!'s first quarter profits rose easily beating forecasts but its revenues were
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flat and shy of estimates. feeling the impact of declining web traffic and ad sales fell 11%. yahoo! is projecting second quarter revenues falling shy of expectations and ceo marissa mayer says her plans to reverse that trend remain on track and will start showing results in the second half of the year. she caution it is will be years before yahoo! grows at the rate of ge facebook. shares are down after hours. better than 5% now in early trade in frankfurt. on that note about earnings, let's get back out to brian reynolds joining us from boston. chief market strategist. we have spoken in the past about earnings and the fact that it's frankly a buyback driven market. we saw an extraordinary level of buybacks in the first quarter, does that continue to support equities from here? >> i think it will accelerate going forward. the acceleration we saw in buybacks in the first quarter was buyback announcements. most of that money hasn't hit the market yet.
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and the credit boom which drives the buyback by providing tons of cash on corporate balance sheets from bond sales that companies make, that's going to be increasing as well as this year goes on. you look at earnings and they're beating lower than expectations. that was clear. if you look at cash flows around corporate tax time you can tell that companies will beat lower expectations. revenues are nothing to write home about. we're in a slow economy. the slower the economy, the bigger the credit book and bigger the share buybacks have in driving stock prices higher over time. >> you're calling this voodoo. there's a powerful force between buybacks and money from pension funds will continue and that's why as you indicated earlier looking at the sell-off in gold and what it has done to takeout equities and say if anything it's a buying opportunity.
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>> it is voodoo finance driven by financial engineering. that will drive stock prices higher over th years because we're in a credit boom. credit booms always end and they end badly. they probably won't end for two to five years and that's longer than most analysts think this cycle is going to last. it's going to drag stock prices up but if you're a long-term investor, you can't own stocks. you can only rent them. >> does that mean it ends badly for china here too. we've seen so much focus in the news today on the local government debt levels. any way they avoid a similar crash outcome? >> there was a story today about china's local debt being out of control. i say debt is out of control in most areas of the world not just in china but in the u.s. and europe. the question is how long that can persist and can it become more intense and given that our financial system is being driven
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by our pension system. >> we'll leave it there. thank you for your time this morning. chief market strategist there joining us out of boston. speaking of china, tale of doom and bloom for automakers in europe but that country is a different story. phil lebeau will join us to tell us more after the break. we'll leave you with pictures of the funeral of former u.k. prime minister margaret thatcher. that procession is now making its way down fleet street. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age.
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here's your wake up call. [ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose double miles or 2% cash back on every purchase every day. what's in your wallet? [ crows ] now where's the snooze button? welcome back to "worldwide exchange." i'm kelly evans. the tech sector disappoints with so-so earnings for intel and yahoo!. stocks in europe turning lower after the rebound yesterday and more details emerging about monday's deadly bombings in boston. no one yet claiming responsibility. now europe struggling car sector took another hit last month with new registrations falling 10%. the u.k. was the only country to avoid a downturn posting a near 6% rise in new passenger car sales.
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this while key markets in germany and france saw double digit declines. first on cnbc interview, an expectation of sluggish growth in europe for next five years but sounded optimistic on other markets like china. >> it won't happen in the first half in europe. china is moving ahead. i read the other day a growth rate of only 7.7 is poor. i think it's sustainable growth rate. u.s. you had discussion on housing starts and employment coming back at a progressive rate. our own view is europe will run at this level maybe lower for a while and have a very slow recovery under two points of gdp over the next four to five years. >> phil beau has been taking a closer look at the growth plans in china and joins us live on the ground from a ford plant. phil, that's quite the trip. just how big are these plants?
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how many of them are there across china and how important is this market to ford? >> massively important, kelly. if you want to see how hot ford is running in china, there's not an automaker running hotter. this is where they sell the focus. one rolls off this assembly line every single minute and they still can't keep up with demand. how quickly are sales growing in china? we've had a chance over the last couple days to be at this plant and at a ford dealership. sales are up in the first quarter 54% here in china. that's three times faster than the industry sales pace here and at this assembly plant it's one of nine that will be online here in china for ford. they pumped nearly $5 billion into into this country doubling capacity by 2015. >> we're the fastest growing brand. we're doubling our production capacity and bringing in all of
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the vehicles now and to have diversity is a very good base for us to continue to serve the chinese customers. >> take a look at ford's passenger car sales growth since 2006. it's tripled and when you look at the entny since 2008 over the last five years, the stock is up 72% in large part because of the growth here in china. no doubt the strategy of growing sales in china which he said early on when he became ceo is working for ford as they bring more plants like this up to speed. kelly, back to you. >> the weaker that european sales are the more they'll need it. phil lebeau, thanks very much. "worldwide exchange" for you. it's another big day for financial related earnings in the u.s. today. among the big names, b of a and amex. mary thompson may know a little
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bit about it. >> they are dow components reporting results today. bank of america up before opening bell. one of the last big banks to le if it like rivals depends on cost reserve to help the bottom line. analysts report the firm will report profits. revenue is seen rising 5% to 23.25 billion. bank of ameri american express reports after the bell today. investors are watching to see if higher payroll taxes will have any impact on the client spending. the firm said in the past high end clients spending depends more on economic growth tha to any changes in tax policy. analysts do say that amex
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faces tough year over year comparison but the firm does hality with cost cutting and buybacks to manage earnings and helping it reach its goal this year. kelly, back to you. >> thanks very much for that. we'll keep an eye out for those reports in just the next couple of house. we're also keeping an eye on the funeral procession for margaret thatcher in london. you're looking at pictures of that coffin arriving at st. paul's cathedral. that's st. paul's directly ahead. quite a crowd on both sides. not that loud, not that rowdy. if anything as ross and others indicated it's a pretty quiet affair. that's certainly what margaret thatcher, herself, had wanted. we'll take a break. when we come back, yahoo! ceo marissa mayer says it could be years before the company returns to strong growth. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs,
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yahoo!'s first quarter profits rose easily beating forecasts but revenues were flat shy of estimates and the company feeling the impact of declining web traffic. display ads falling for the second straight quarter and yahoo! projecting second quarter revenues that fall shy of analysts expectations. what's the market reaction? what's it mean? scott joins us now. good morning. what's your initial reaction here? >> well, kelly, the initial reaction is that the eps number was notably higher than a lot of folks expected which clearly is a positive but those benefits were for nonoperating reasons and as you pointed out, if you look at pricing for example of both kinds of advertising that yahoo! sells whether talking about search advertising or display advertising, we saw notable declines. that is somewhat concerning given the fact that all indications are that the economy and demand have been relatively
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strong for this kind of advertising. >> what are the growth drivers going forward? we heard marissa mayer saying it could take years to grow like google and facebook. >> honestly, it remains to be seen whether or not she's going to be able to implement the kind of turnaround that some people expect. frankly at this point we're still looking for kind of mid single digit revenue growth for yahoo! over the next couple of years significantly below that which we are seeing from the likes of facebook and google. >> what do you do with these companies? yahoo!s, intels of the world whose moment has passed? do you not just look for companies more attuned to where the data is headed from here? >> i think that's an important question. when people are thinking about yahoo! at this point, at least our interpretation is that the
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reason to be interested in yahoo! the company and yahoo! the stock really lies not necessarily in the turnaround prospects led by marissa mayer but more in the balance sheet assets. if you look at the investments in yahoo! japan and the significant cash and investments, what you have is arguably value that constitutes more than half of yahoo!'s market capitalization. that we think is really going to be the driver for potential realized value in the quarters to come. if people really believe in the turnaround story, then we think this is a great name to kind of align yourself with. the big question is how much of that value is realized and can a turnaround be implemented. >> we'll leave it there. thanks. we want to leave you with pictures of the funeral of former u.k. prime minister margaret thatcher. that's her coffin just arriving
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at st. paul's cathedral in london for the funeral which gets under way in just a couple of minutes time. more than 2,000 guests. it's notable for who's not in attendance as for who is. reaction from people gathered on the scene and along the route as well has been an important story. we'll leave you with pictures of that coffin as it enters st. paul's for the funeral of former british prime minister margaret thatcher. tired, achy feet draining your energy?
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good morning. u.s. equity futures pointing to a lower opening on wall street follow yesterday's rally. in boston, investigators are still searching for clues for the bombing and in washington it's so weird because similar things happened 12 years ago. a letter to a senator is found to contain ricin, a poison. it's wednesday, april 17th, 2013. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with